A recent survey by the Restaurant Association of Metropolitan Washington revealed that 29% of respondents are at least somewhat likely to close their restaurants in 2025. That number rises to 44% for full-service casual establishments. [1] For many DC area restaurant owners, already grappling with high operational costs, staffing shortages, and shifting consumer habits, this data confirms widespread industry concerns.
The uncertainty is further compounded by the General Services Administration’s mass lease cancellations for federal government office space. The ripple effect of fewer federal workers in the city could mean reduced foot traffic for restaurants that have long relied on that customer base.
If you’re a restaurant owner in the DC area facing potential closure, it’s important to understand your legal rights and risks. Below are some of the key legal considerations to keep in mind:
1. Review Your Commercial Lease Carefully
For most restaurants, the lease is one of the largest liabilities—often spanning 5 to 10 years and including a personal guarantee by the owner(s). The inclusion of a personal guarantee can expose not only your business, but also you personally, to financial liability in the event of an early termination or breach.
Provisions to review closely include:
- Personal guarantees and indemnification provisions
- Termination clauses
- Force majeure provisions
- Notice requirements
- Penalties for early termination
- Liquidated damages clauses
- Condition requirements upon return of premises
- Attorneys’ Fees Provisions
- Landlord’s duty to mitigate damages
- Default provisions, including filing or threatening to file bankruptcy
Each of these provisions can significantly impact your legal and financial exposure during a closure or lease exit. Under most state laws, commercial tenants receive less legal protection than residential tenants, so it is important to carefully consider your rights and responsibilities before jumping into a business decision.
2. Negotiate Early to Minimize Liability
If you’re contemplating closing or downsizing your operations, time is your ally. Landlords are more likely to negotiate reasonable terms—including lease buyouts, rent abatement, or assignment/subletting opportunities—if approached early.
Depending on your lease terms, you may be able to:
- Negotiate a lease buyout to avoid future liability
- Assign the lease to another tenant or sublet the space
- Work with the landlord to modify the lease terms temporarily or permanently
Early, strategic communication with your landlord—backed by legal counsel—can help you avoid unnecessary financial hardship.
3. Don’t Overlook Corporate and Employment Law Obligations
Shutting down a restaurant involves more than closing the doors, and more than just commercial lease considerations. You’ll need to consult your:
- Corporate governance documents to ensure proper wind-down procedures and other members or shareholders rights are not violated; and
- Employment contracts and be aware of federal and state employment laws, including required notices to employees and final wage requirements
There may also be obligations related to your business licenses, vendor contracts, and any outstanding liabilities that should be managed to avoid future claims.
Closing down business operations can be stressful and a disappointing occurrence, but owners need to be careful not to add insult to injury by failing to properly assess its legal rights or responsibilities and ending up in litigation. Lawsuits are expensive and time-consuming and often can be avoided by up front advice and risk assessment.
If you’re a restaurant owner in the DC area considering closure or would like to explore your legal rights or responsibilities, please contact Harrison Clinton (703) 526-5587 or hclinton@beankinney.com or Jennifer Schiffer at (703) 526-5590 or jschiffer@beankinney.com.
This article is for informational purposes only and does not contain or convey legal advice. Consult a lawyer. Any views or opinions expressed herein are those of the authors and are not necessarily the views of any client.
[1] https://www.bizjournals.com/washington/news/2025/03/18/dc-restaurant-outlook-ramw-survey-shawn-townsend.html